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TMI Blog1984 (2) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... e stores, which came to Rs. 1,994. The two sums aggregate to Rs. 21,550 from which a sum of Rs. 5,000 was deducted as remuneration payable to S. Kuldip Singh in whose name the contract was taken. This left a sum of Rs. 16,550 as profit derived from the business of contract taken by him during the year. This assessment was made on 27-5-1974. The ITO received information that the total payment, received from MES during the year, came to Rs. 2,95,052 and not Rs. 2,35,439, representing Rs. 1,95,556 and Rs. 39,883. This led the ITO to reopen the assessment and apply a rate of 12 1/2 per cent to the total receipts to work out the net profit, derived from the work of contract. He worked out a profit of Rs. 31,881 as against the sum of Rs. 16,550 assessed earlier in the assessment made on 27-5-1974. He also caused another addition of Rs. 18,000 for unexplained investment made in the contract work from undisclosed sources. According to the ITO, the total payments received in the month of May 1972 amounted to Rs. 29,563. This being the first month of receipt of contract payments, he estimated initially the investment of Rs. 18,000 made by him. He caused the sum to be added as the income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the ITO in his second assessment, were there before the ITO. It is not the case of the ITO that any information had been withheld or not supplied by the assessee at the time of the original assessment. He had the information at the time of original assessment that the receipts of May amounted to Rs. 29,563. Therefore, this information could not lead the ITO to a finding at the time of second assessment regarding the initial investment. The law does not permit a second look on the same facts for drawing a different inference. The law permits a second look, no doubt, but that should be when the ITO has brought out some fresh material to justify a second look at his earlier finding. We cannot, therefore, uphold the addition of Rs. 18,000 towards the initial capital investment in the business of contract, which we, accordingly, delete. 5. The appeal of the assessee is allowed. Per Shri P.K. Mehta, Accountant Member--I am unable to agree with my learned colleague to delete totally the additions on account of contract income and unexplained investment in contract business. Before dealing with the issue, I will like to point out a factual error in para 2 of the order in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The order sheet entries from 24-2-1978 to 22-1-1979 speak eloquently about the ITO's efforts and the opportunities given to the assessee to reconcile figures and these entries are reproduced below : " 24-2-1978--Present Shri R.S. Makhni, ITP on behalf of the assessee. Return filed also placed on record. Asks for time for reconciling the payments received. Case adjourned to 15-3-1978. Sd/- ITO. Sd/- ITP. 15-3-1978--Present Shri R.S. Makhni, ITP on behalf of the assessee. File application for adjournment on the plea that payments under dispute are to be got verified from the concerned officer. Case adjourned to 17-4-1978. Sd/- ITO. Sd/- ITP. 17-4-1978--Present Shri R.S. Makhni, ITP. Request for further time for furnishing the information. Case adjourned to 28-4-1978. Sd/- ITO. Sd/- ITP. 28-4-1978--Non present, Fix again. Sd/- ITO. 7-8-1978--Issue notice under section 142(1) of the Act for 19-8-1978. Sd/- ITO. 19-8-1978--Present Shri Kuldip Singh S/o Shri Charan Singh, partner along with Shri R.S. Makhni, advocate. Requested to furnish as under : (i) Complete books of account of Sialkot Tannery Works. (ii) Bank pass books of the payments received. (iii) Copy of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bri Base, which showed that the total payments received by the assessee came to Rs. 3,10,900. Till 16-10-1978, the assessee had not furnished the information as desired on 19-8-1978. On that date, the ITO further asked the assessee to intimate the source of investment in contract. There were again a number of hearings. On 27-10-1978, the assessee was supplied with seven certificates of payments issued by the MES authorities for the purpose of verification and the case was adjourned to 1-12-1978. On 1-12-1978, the ITO noted that nothing had been done by the assessee to get the payments verified. On that date, duplicate copies of payments amounting to Rs. 1,33,300 were supplied to the assessee. There is nothing in the order sheet entries which would support the observation of my colleague that payments amounting to Rs. 1,33,300 were twice taken in the gross sum of Rs. 3,10,900. In the order sheet entry dated 1-12-1978, the ITO had again asked the assessee to give date-wise certificates of payments from MES authorities together with evidence of source of investment in firm. The ITO had also written to the MES authorities direct and had obtained information about payments from Garrison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showed higher figure of payments than the two certificates issued in 1973. In these circumstances, the ITO cannot be blamed for finally deciding the case by considering the figures supplied by the assessee by letter dated 18-1-1979 and the figures obtained by him directly under letter dated 14-1-1978 from Garrison Engineer, Tibri, Base. Consequently, I am of the view that the gross payments which included value of stores issued and income-tax recovered at source were Rs. 2,93,641 instead of Rs. 2,95,052. If there is any conflict in the figures in the certificates issued by the MES authorities the assessee cannot benefit from that situation as it has itself to blame for the MES by neither keeping proper accounts nor gathering the information from bank statements where the payments would have been collected. The ITO very patiently gave the assessee all the time and opportunity to reconcile the figures but this had proved in vain. To furnish the figures of contract receipts was the responsibility of the assessee and so far as the payments from Garrison Engineer, Amritsar, are concerned, it has discharged that duty by filing the certificate dated 18-1-1979. It is interesting to note t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment in contract business and both he and the AAC have indicated in the orders that the assessee was called upon to produce the books of accounts of Sialkot Tannery Works in order to verify, if any, capital flowed from the firm to be utilised in the contract work but the assessee did not comply with the ITO's direction. The ITO then considered the statements of accounts of partners of the firm furnished during the course of original assessment proceedings and found that the firm had not included the investment in those statements of accounts and the contract work investment was, thus, kept outside the books of account. No proper accounts have been admitted to have been kept for the contract business. In this connection it is relevant to look into the assessment order dated 27-5-1974, which shows that the assessee worked out the profit by applying the net profit rates of payments and the value of stores received and the ITO has also observed that the assessee had not kept any proper accounts for the contract work. In view of these clear facts, the ITO had raised a very valid and interesting point about the source of investment in the contract work and he gave the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO has also gone into the question of the source of the amounts invested in the execution of contract work with reference to which contract payments have been received. 6. The appeal is partly allowed as indicated above. THIRD MEMBER ORDER Per Shri V. Balasubramanian, Vice President --The assessee is a contractor for the supply of charpai, blankets, etc., to the Garrison Engineer, Amritsar, and other places. An original assessment was made in this case where after including the cost of materials supplied, the receipts were shown at Rs. 2,35,439. The assessee having no books of account had returned an income by estimating a profit of 10 per cent on original receipts and 5 per cent on cost of materials. The ITO made an assessment accepting the figure of total receipts and adopting a profit rate of 12 1/2 per cent. Subsequently, the assessment was reopened by him in order to bring to tax certain additions to the receipts not considered in the original assessment and found out from scrutiny of certain certificates received from the governmental authorities. In the reopened assessment the income was worked out on total receipts of Rs. 2,95,052 with a gross profit rate of 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment was valid and proper. It is settled law that in a reopened assessment any escapement of income could be gone into and compensated. Even the assessee's learned counsel was not able to establish that at the time of the original assessment, the ITO had looked into the question of investment or that the assessee had himself furnished any details as to the initial investment. The source of initial investment, therefore, had come up for consideration for the first time, the technical point, therefore, made out by the assessee and supported by the learned Judicial Member cannot be accepted especially after the reopening itself has been found to be proper. On merits also, the addition is justified and the quantum of addition is proper. That the assessee received sale proceeds from the Government on account of supply of goods even in the very first month of the year is clear. This would have necessitated the initial investment. The only claim made by the assessee is that the investment was made very much earlier than the beginning of the year and was also financed by the bank loan taken on 30-1-1971. Even if the period for which the loan was availed of is not as long as s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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